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Important Facts:
Situational Analysis:
Comparative Analysis:
In the CSD and non-CSD beverages industry, currently Coke and Pepsi are the market
leaders with collectively 72% market share in volume. The next major competitor is Dr.
Pepper Snaple Group with 16.4% market share captured and the remaining by the local and
regional beverage producers.
Coke followed the 1987 Master Bottler Contract for pricing its concentrates for bottled and
canned beverages in U.S. which granted Coke right to determine the process and other terms
of sale. Pepsi followed Master Bottling Agreement which required the bottlers to purchase
the raw materials from Pepsi at prices and terms determined by Pepsi and granted perpetual
rights to distribute its CSD products.
Both Coke and Pepsi had around 100 production plants for nationwide distribution of their
products.
While Pepsi focused sales through retail outlets, Coke had the lead through fountain sales.
Pepsi entered the fast food restaurant business by acquiring few food chains. Coke followed
suit since as both these companies implemented almost same strategies as the other so as to
not let the other gain in competitive advantage. It has always been when one take an innovate
step, the other immediately counters with its similar strategy.
Pepsi has been more aggressive in expanding its non-CSD portfolio (product innovation)
than Coke by introducing more non-carbs than Coke between 2004 and 2007. In reaction to
Coke expanded its non-CSD portfolio through acquisitions. By 2009, Pepsi has 43% of noncarbs market share in U.S while Coke has 32%.
Coke performed better in international markets deriving 80% of its sales from there while
Pepsi could get only 50% and relied on U.S. Hence, in early 2000s, Pepsi focused more on
emerging markets like Asia and Africa. However, CSD consumption being lower in abroad,
both pursued non-carb opportunities in international markets.
In marketing strategy, Coke spend $230 mn in advertising for Cola-Cola, it spent on
sponsorships and global marketing such as for World Cup in 2010. Whereas, Pepsi
redesigned its logo in 2008 and spending $1 bn over 3 years to rejuvenate its image and
promoting the companys overall image as a snack and beverage company. This shows how
hard Pepsi is trying to go ahead of Coke which has remained ahead of Pepsi most of the
times.
Pepsis strategy was to beat Coke in every step they take and hence provided beverages at
lower prices than coke. It has been targeting only young people which is one of the reasons it
is lagging behind Coke.
Alternatives:
Maintain the status quo: The market is mature and is giving you stable returns; since the only
threat is the other, both can enjoy the cow nature of the market.
Continue to expand the market in terms of new products; Run marketing campaigns; create
more reasons to buy beverages.
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